2023

The past week was relatively muted in terms of action, as you would expect in this seasonal period; the whole year was a different story.

Best wishes for a merry and peaceful Christmas day.

When it comes to communicating with the markets and managing expectations, the Federal Reserve Board under Jerome Powell has been one of the most effective official organisations I have seen in my career.

Markets had another good week, buoyed by more news that indicated we are on the path to a gradual moderation of economic activity without falling into a recession.

“Unfortunately civility is hard to codify or legislate, but you know it when you see it. It’s possible to disagree without being disagreeable.”
Sandra Day O’Connor

Much of the so-called developed world is rapidly or about to begin losing population, with Japan and Italy perhaps the most glaring examples and, oddly, the US not far behind (cover and first graph below).

The last four weeks have been full of important events, the most visible of them linked to the wars in Ukraine and the Middle East. Looking at what financial markets did over the same period you would have never guessed much had happened.

The last couple of weeks made us feel like we returned to the horrible 2022: both equities and bonds were down and in a significant way.

Despite another expected rise in official rates (in the Eurozone), equities outperformed bonds last week, maybe because investors think (or hope) that every successive tightening brings us closer to the end of the monetary cycle.

For the past few months the basic story (I should say ‘theme’ but I hate the word) in the markets has been the same, causing rising discomfort pretty much everywhere.